Revenue-based financing (RBF)

Revenue-based financing is a flexible debt instrument where a lender advances capital and recovers it by taking a fixed percentage of the borrower's monthly gross revenue until a pre-agreed repayment cap (typically 1.2–2× the principal) is reached. There is no fixed EMI — repayments rise in high-revenue months and fall when revenue dips, making it inherently counter-cyclical.

This structure suits recurring-revenue businesses — particularly SaaS, subscription e-commerce, and marketplace models — because the repayment rhythm mirrors how the business generates cash. A company growing quickly repays faster; one facing a slow quarter automatically gets breathing room. Equity is not diluted, and control stays with the founder.

In India, RBF is offered primarily by fintech NBFCs and dedicated RBF platforms that integrate with a startup's payment gateway, GST portal, or banking data to assess revenue quality in real time. Underwriting is therefore faster than traditional bank credit — some platforms disburse within days. Ticket sizes typically range from a few lakhs for early digital businesses up to a few crores for established SaaS companies.

The trade-off is total cost. Because the repayment cap can be 1.5× or more of the principal, the effective annualised cost depends entirely on how fast revenue grows. A rapidly scaling company repays quickly and the APR is steep; a plateauing company repays slowly and the total cost looks more reasonable. Founders must model multiple growth scenarios to understand the true cost before committing.